T-Bills Still Above Waters As January Drags On

During the week, T-bills remained oversubscribed, albeit at a lower rate, with the overall subscription rate coming in at 108.9 percent, down from 131.7 percent recorded the previous week.

Investors’ preference for the shorter 91-day paper persisted as they sought to avoid duration risk, with the paper receiving bids worth 15.7 billion shillings against the offered 4.0 billion shillings.

The preference by investors led to a translation to a subscription rate of 392.3 percent, down from 482.9 percent recorded the previous week.

The subscription rate for the 364-day paper increased to 46.7 percent from 44.8 percent recorded the previous week, while that of the 182-day paper declined to 57.7 percent from 78.0 percent recorded the previous week.

The yields on the government papers were on an upward trajectory, with the yields on the 364-day, 182-day, and 91-day papers increasing by 6.3 bps, 1.2 bps, and 3.3 bps to 10.4, 9.9, and 9.4 percent respectively.

The Government accepted a total of 26.11 billion shillings worth of bids out of the 26.13 billion shillings worth of bids received, translating to an acceptance rate of 99.9 percent.

The graph below shows the overall T- bills subscription rates from 2017, 2022, and 2023 Year to Date (YTD):

In the Primary Bond Market, the Central Bank of Kenya released the auction results for the recently re-opened bonds; FXD1/2020/005 and FXD1/2022/015 with effective tenors to maturity of 2.4 years and 14.3 years respectively.

The bonds recorded an undersubscription of 83.3 percent, in line with our expectation, partly attributable to investors’ preference for the shorter-dated papers as they sought to avoid duration risk.

The government issued the bonds seeking to raise Kshs 50.0 bn for budgetary support, received bids worth Kshs 41.6 bn, and accepted bids worth Kshs 31.5 bn, translating to a 75.7 percent acceptance rate.

The weighted average yields for the bonds came in at 12.9 and 14.2 percent for FXD1/2020/005 and FXD1/2022/015, respectively, while the coupon rates came in at 11.7 percent and 13.9 percent for FXD1/2020/005 and FXD1/2022/015, respectively.

Related Content: 364-Day T-Bills Outperformed Other Asset Classes In 2022